The government paid £16 million for a free school site that was later valued by the council as worth £5.3 million.

The Education Funding Agency bought a former fire station in Hackney, north London, to house a new primary for 350 pupils run by the Hackney New School, based next door.

It is believed the government had to match a £16 million bid from a hotel developer to secure the site, which will also house 69 new flats.

But documents show the council valued the site at £5.3 million.

They also show the government wants to recoup as much of its spend as possible from the flats, which will also fund the school building.

However, the viability assessment found the development would not be profitable if it included affordable houses – so no such requirement was included. That is despite Hackney council’s policy that new housing developments should have 50 per cent of affordable housing.

Nick Perry, director of the Hackney Society planning group, said the “astronomical” land price was behind the lack of affordable homes “at the time of a housing crisis”.

A Department for Education spokesperson said: “We do not pay in excess of what a site is worth or purchase expensive sites if
there are better value for money alternatives in the area.”